A couple of Tax Deductions For Texas Oil Investing That You Should Know
Texas oil investing is probably the most sought after investment method, thanks to appealing waivers on taxes offered by the government.
It was in an effort to influence private investors that the government chose to provide separate forms of tax reductions for the Texas oil investor.
1: Active Vs Passive Income
The Tax Reform Act, 1986, unveiled the notion of passive and active income to the Tax code. The act prohibits, offsets loss from any passive activity against incomes from an active business.
Best of all, the act obviously specifies that an oil well or natural gas well is not a passive activity. It goes without saying that, this results in attractive offers on tax.
2: Tax Exemption For Small Producers
In 1990, the reformed Tax Act brought numerous special rewards for small business establishments and individuals. One of the interesting principles introduced was Percentage Depletion Allowance, a special clause brought to the law in an attempt to entice private investors to put extra money in oil and natural gas drilling.
This is particularly beneficial for the small investor as the Act doesn’t cover large petroleum companies and petroleum retailers. Refineries that process crude oil of more than 50,000 barrels a day are also not eligible for the exemption.
For the small investor, there is 15% tax-free profit on their gross income and this is a sizable amount that you can expect only from Texas oil investing.
These are the main two tax exemptions offered by the United States government to encourage individual participation in the oil and natural gas industry.
The results of these laws were extraordinary, resulting in active participation from small investors; in both oil and natural gas drilling. It made Texas oil investing one of the most desirable investments in the United States.